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Biz Break: Barracuda Networks IPO primes pump for Twitter

Barracuda co-founders Michael Perone, Zach Levow, Dean Drako, and CEO & President William "BJ" Jenkins ring the opening bell at the New York Stock Exchange on November 6, 2013 in New York City. (Photo by Dario Cantatore/NYSE Euronext) (Ben Hider)

Barracuda Networks sold more than 4 million shares at $18 apiece, the low end of its $18-to-$21 range, to raise $74.5 million at a valuation just shy of $1 billion before arriving on the New York Stock Exchange on Wednesday morning. Once traders got their hands on Barracuda stock, shares reached the high end of the company's IPO range and stayed there, trading in a range from $20.78 to $23.80 before closing at $21.55, 19.7 percent higher than the IPO price.

The security company ran the same route San Francisco microblogging service Twitter was expected to traverse 24 hours later: Announcing a price for IPO shares, ringing the bell to begin trading on the NYSE in the morning, then watching the market's demand play with the stock's price.

"We're glad Twitter let us go out in front of them," Barracuda CEO and President William "BJ" Jenkins said in a telephone interview Monday, "that was nice for us."

Barracuda President and CEO William Jenkins, right, joins applause as his company's stock begins trading during its IPO on the floor of the New York Stock Exchange, Wednesday Nov. 6, 2013. Barracuda provides cloud-connected security and storage solutions. (AP Photo/Richard Drew)
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While Twitter receives a great deal more attention because it is a consumer service familiar to millions of Americans, Barracuda operates in a tech sector that has many more comparable companies that have exercised successful IPOs and found strong demand on Wall Street. Facebook is the only large social network comparable to Twitter to sell initial shares in the past two years, but a host of Barracuda's potential rivals have completed the IPO obstacle course, including fellow Silicon Valley companies like Qualys, FireEye, Palo Alto Networks and ProofPoint.

With cloud computing -- also known as software as a service, or SaaS -- rapidly changing the way businesses store their important data, companies such as Barracuda have found overwhelming need for services that help secure and retain such information.

"More threats come every day for customers of all sizes, so the landscape is constantly changing and evolving, so technology has to evolve to meet those threats," Jenkins said Wednesday.

"Cybersecurity has really gone to the top of the IT priority list and vendors, both public and private, are going to benefit over the coming years from that demand," FBR Capital Markets analyst Daniel Ives told Reuters.

Barracuda has not been reliably profitable thus far, after a decade in the industry: The company produced less than $500,000 in profit on revenues of $160.9 million in its 2011 fiscal year, but dropped to a loss of $9.2 million on revenues of $198.9 million in 2012, and lost $4.6 million on revenues of $114.1 million in the first six months of its 2013 fiscal year. Jenkins noted the company's free cash flow was enviable, and said that the company planned to return to profitability soon.

Barracuda, which trades under the ticker symbol CUDA, will receive all the proceeds from its stock sale, as early investors and executives chose not to sell shares. In fact, some board members planned to purchase additional shares in the company's offering. The company's underwriters had access to an additional 621,000 shares if demand dictates.

Tesla dropped 14.5 percent to $151.16 as analysts came down on the stock following Tuesday's quarterly earnings report, which showed that the Palo Alto electric car maker is struggling to meet global demand for its Model S. Tesla's decline was its worst day on Wall Street in two years, but negativity about its earnings report was not unanimous. Some analysts who cut their price targets kept them higher than Tesla's current price, including Wedbush Securities analyst Craig Irwin, who cut his price target from $240 to $205 and said, "We see strong positives in Tesla's credible path." Jefferies analyst Elaine Kwei also has a price target of more than $200, and wrote, "With a technology advantage, desirable and differentiated products, and proven execution, we think we're only scratching the surface of things to come" from Tesla.

And the widely watched Standard & Poor's 500 index: Up 7.52, or 0.43 percent, to 1,770.49

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.